Nickel and Dimed? The Rise in Fees at Restaurants
Going out to eat, there are fees for health care, rising wages, and credit cards. Why not just raise prices?
Photo by 9dreamstudio/Fotolia
Do you want your night out at a restaurant to be like flying Spirit Airlines? (Please say no!) Just like how you pay for a carry-on bag, and check-in, and to get a soda on board, I've been noticing more and more restaurants adding fees for various things to the end of our checks.
Kim Bartmann's restaurants (Barbette, Pat's Tap, Red Stag, Tiny Diner, the Bird) started last year adding a 3 percent surcharge to help offset the cost of providing health insurance to employees. Surly Pizza Upstairs adds a 7 percent service fee to every check. They say it's to pay employees a higher hourly wage. P.S. Steak just opened in the old La Belle Vie space, and they're adding a 3 percent surcharge "to assist in our employee healthcare and wellness coverage." On a $88 bone-in ribeye, that's another $2.64. Why not just price it at $90?
"What do people want? This is their experience. If we take away from their experience, that's a problem," says Erik Forsberg, the owner of Devil's Advocate, which just opened on Nicollet Mall in the Target headquarters. "If the last thing is something negative, it doesn't matter what happened before; it's over."
Devil's Advocate is doing a discount instead of surcharge. Instead of rising wages or the cost of health care, he's going after credit card fees. "So I baked it into the price and offered essentially a 4 percent discount for using cash. The guest perception is that they're getting a deal, when the reality is, credit card users are paying the processing fee," he says. You do have a choice, however—as opposed to the benefit or salary fees others are adding. You can pay cash. "Our costs have gone up," he says. "Credit cards have been screwing all of us for a long time."
I was surprised to hear card costs to merchants are up to 4 percent. Visa and Mastercard charge restaurants like Forsberg's closer to 2 percent, but American Express and Discover charge higher percentages, and when you add the fees charged by the interchange system that processes the card payment, Forsberg said he gets close to 4 percent.
"Ten years ago, when I opened my first place, roughly 80 percent of my business was cash," he says. "You didn't have the credit cards. There were no debit cards. Now, it's 90 percent of our business. They charge us, and they charge you with an annual fee. Those miles and perks aren't free. They're charging the merchant. It's thousands of dollars a month for us." Credit card fees rise, just like food costs, rent, and a million other things that add a couple cents or bucks here and there to your menu price. But there does seem to be a limit to what people are willing to pay for the sticker menu price, so adding a fee is a way to stay competitive. "We don't know what will work," Forsberg says. "I'm having this discussion with other restaurateurs. What we do know is that we have to do something. If we just raise prices, absorb it all in the prices, people are not going to pay $25 for a cheeseburger. At least not yet. And everybody would have to do it."
Who knows what will work. Either way, we all need to start paying more attention to our receipts and let the managers know what we like. Does paying a benefit fee make us feel good, that we're supporting a place that provides health care? Does seeing someone offer a discount for cash make us motivated to go to an ATM? Are we going to tip on the total—or will the fees have more people tipping on the subtotal? What will you do?